Regulators Need to Start Innovating on the Regulatory Burden

  • JJ Hornblass
  • May 22, 2013
  • 6

shutterstock_125379404No one should be surprised that regulatory compliance concerns cast a long shadow over FinTech startups. What is surprising, however, is just how much longer is that shadow today.

If you want to create a FinTech startup today, you are advised to start your strategic thinking with a review of the Bank Secrecy Act of 1970, the Money Laundering Control Act of 1986, the Anti-Drug Abuse Act of 1988, the Annunzio-Wylie Anti-Money Laundering Act of 1992, the Money Laundering Suppression Act of 1994, the … well, you get the picture. What these confining regulatory demands do is confound the ability of startups to think creatively about possible financial products and services. And that’s bad for everyone.

Don’t get me, wrong — I am not advocating a weaker regulatory framework. I am, however, advocating for an easier regulatory framework. Last July, the Department of the Treasury held a competition called My Money AppUp. The competition, which included a grand prize of $10,000, sought out “the best ideas and designs for next-generation mobile tools to help Americans control and shape their financial futures.” The winner was Centz, which helps students manage their debt — a worthwhile app, for certain.

But is this the best use of Treasury funds and efforts when Silicon Valley is preoccupied with doing the same — and for the potential to “win” a lot more than $10,000? The short answer is no.

The regulatory agencies — Treasury, the Federal Deposit Insurance Corp, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, et al — should in measure, if not equal measure, consider ways to ease the regulatory burden (without eroding the regulatory framework).

You want a competition to run, Treasury, how about offering $10,000 to the idea that makes adherence to existing regulations easier for financial services companies? Throw a carrot into the marketplace for an idea that makes it simpler for a startup that wants to engage in financial services to, well, start up.

(No word from the Treasury Department on whether iot will hold the AppUp competition again this summer.)

This is not just some fanciful, let’s-help-the-banks notion. The regulatory burden has a cost for every American, regardless of credit score. Regulators should take responsibility for that cost and endeavor to minimize it. I see no evidence of such an endeavor, particularly from the new CFPB. Well, I suppose regulators can ignore this call — if they want to squash FinTech startup engine, too.

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JJ started the first iteration of Bank Innovation back in 2007, and has been working on it ever since. He also serves as President & Chief Executive Officer of Royal Media, Bank Innovation’s parent. He founded Royal in 1995 and oversees all aspects of the New York-based diversified media company. Prior to forming Royal, JJ was on the editorial staff of American Banker, the daily newspaper, and worked as an editor of a business magazine in Hong Kong. As a reporter and editor, he has won journalism awards from the National Press Foundation, Newsletter & Electronic Publishers Foundation, and the Reader’s Digest Foundation. He has a BS in Economics from Yeshiva University and a Master’s from the Columbia University Graduate School of Journalism. He was also a Fellow at the University of Wisconsin-Madison Graduate School of Banking. He lives in New York City with his wife, two daughters, and son. He counts among his accomplishments one New York City Marathon, two New York City Triathlons and the 2010 Father’s Day 5K, the first race he ever ran with his daughters. He can be reached at or 212-564-8972.

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6 thoughts on “Regulators Need to Start Innovating on the Regulatory Burden

  1. Did someone just mention “government” and “innovation” in the same sentence?

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